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Panchabuta founder Vineeth Vijayaraghavan

Vineeth Vijayaraghavan is the founder and editor of Panchabuta, one of the few news sites that covers developments in renewable energy and clean tech in India. Vijayaraghavan sat down with me yesterday at the Cosmopolitan Club in Chennai, India, to discuss the latest happenings and what foreign investors need to know.

Q: If you had a million dollars to spend, which Indian clean tech companies would you fund?

Vijayaraghavan: If it were a pure venture-capital investment, I would probably look at some very good smart-grid companies that are coming up. There is a company called Kalkitech Intelligent Energy Systems, where the IFC has invested money. There are other very interesting companies coming out in the energy efficiency, waste heat recovery, and waste energy space, and these are all very exciting because the payback is typically between 18 to 24 months. One is a company called mechworldeco that is in energy efficiency, and another is called GIBSS. Very good patents and excellent technology and with a very good payback, just because the cost of energy is so high. I would also look at a solar models -- not the large IPPs (Independent Power Producers), but where solar technology gets developed. That's going to be very big. For example, IDEALABS has incubated a company called Duron Energy. There is a company called Simpa Networks, again started by founders from the Bay Area and moved to Bangalore. They are trying some very innovative models in solar energy home systems. I believe the market for solar installers is just starting.

A lot of the attention and fascination from foreigners is about these rice-husk (biomass) companies like Husk Power Systems, and other smaller companies that are coming in right now. Excellent companies, great model, overly well-recognized by foreign investors, but facing significant, significant challenges in terms of scale. They've done a lot of hard work and they've gotten excellent credit for it, but scaling and replicating that model is a very big obstacle they need to surmount.

Q: What is it that foreign investors don't understand about India?

Vijayaraghavan: When I talk to investors when they come to India -- I probably meet five or six of them a month -- they don't understand the challenges related to scale. In India we don't have a separate Department of Energy. There's a separate Ministry of Power. Oil is a separate department, Coal is separate, Petroleum and Natural Gas is separate, and then you have a Ministry of New and Renewable Energy, which is separate from the Ministry of Power. Though the Ministry of Renewable Energy is in charge of renewable energy, the moment the energy is generated, everything else gets handled by the Ministry of Power.

Further, in India, power is what is called a "concurrent subject." What that means is that there are federal regulations, and each state has its own interpretation of those regulations. So what might work in one state might not be able to be replicated in another state, even from a fundamental business-model perspective. The laws are different, the mandates are different, the grids are so different, the fees and the surcharges are different, the policies are different, and this is something that investors don't spend enough time understanding while analyzing the business models.

Q: What are the biggest stories and trends you're following right now?

Vijayaraghavan: India is on the verge of breakout in the solar industry. We just finished 1 gigawatt of solar installation in 18 months. The second phase of the National Solar Mission has just gotten started -- the draft just came out a few weeks ago. The states are starting to take the lead. Two states in the south, Tamil Nadu and Andhra Pradesh, each are going to auction off about a gigawatt of solar capcity in the next 45 days. So we are suddenly seeing utility-scale solar become very popular in India.

Wind energy in India is going through a fundamental change. The market has shifted from multiple, small, individual consumers to large IPPs and there could be some consolidation in the wind industry in India. There could be new leaders who are emerging in this consolidation.

What else is interesting is the renewable energy certificate (REC) program that the Indian government has introduced. It's the same REC market as the U.S. or Austrialia, but it is a purchase obligation that is being enforced by the federal government, with a clear roadmap in terms of how much renewable power each consumer should purchase, and how much is solar and how much is not-solar. If the REC market can really stabilize, it could move the renewable energy market out of subsidies much quicker. These are the big three trends.